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LOU DOBBS TONIGHT

Biggest Point Gain Ever for the Stock Market; Can Senator McCain's Campaign Rebound?

Aired October 13, 2008 - 19:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


LOU DOBBS, HOST: Wolf, thank you.
Tonight a nearly 1,000 point rebound in stocks as the federal government is preparing to recapitalize ailing banks, but who is helping our ailing middle class?

And tonight, Senator McCain shaking up his presidential campaign three weeks before Election Day. We'll have complete coverage.

And tonight, new details of efforts by the left wing activists group, ACORN to manipulate the outcome of this election. ACORN an outfit with long standing ties with Senator Obama.

And among my guests tonight, "New York Times" best selling author and "Wall Street Journal" columnist Peggy Noonan who will tell us about her provocative new book "Patriotic Grace", all of that, all of the day's news and a lot more from an independent perspective straight ahead here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT; news, debate and opinion for Monday, October 13th. Live from New York, Lou Dobbs.

DOBBS: Good evening everybody.

Stocks today soaring in the biggest one day point rally ever and the biggest gain in percentage terms since the great depression. The Dow Jones industrials today, gaining more than 900 points ending eight straight days of losses. One major reason for the strong rebound today, the federal government's efforts to recapitalize this country's ailing banks with taxpayer money. It's a plan that I first proposed on this broadcast weeks ago.

Susan Lisovicz reports now from the New York Stock Exchange on today's massive rally and the reasons behind it.

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): One trader called it the buying opportunity of a lifetime. Investors apparently agreed. The Dow posted its biggest single day point gain ever.

(BELL RINGING)

LISOVICZ: An astonishing leap of 936 points in the first trading session after its worst week ever. Investors were encouraged by a coordinated effort over the weekend among central banks and overseas governments to prop up the fragile global financial system.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: All of us will continue taking responsible decisive action to restore credit and stability and return to vigorous growth.

LISOVICZ: The key to this global effort, a joint recapitalization program where governments could take equity stakes in their banks something that was called for weeks ago on LOU DOBBS TONIGHT.

DOBBS: A very low cost, a recapitalization program that proved to be effective during the S&L crisis years ago.

LISOVICZ: The results of relief that one of Japan's biggest banks sealed the deal with Morgan Stanley to inject $9 billion in that troubled firm. Morgan Stanley shares shot up 87 percent on the day. The Dow's triple digit gains came within seconds of the opening bell and exploded in another raucous final hour of trading.

But analysts are divided as to whether the big rally signifies a bottom or just a head fake in a bear market. Banks were closed for Columbus Day and so the volume was considerably lighter than some of the selloffs of the past week. Investors will be deluged with reports this week on everything from inflation to retail sales and housing starts as well as corporate earnings.

(END VIDEOTAPE)

LISOVICZ: And some of those reports, Lou, may not be well received. Lou?

DOBBS: Thank you very much, Susan -- Susan Lisovicz from the New York Stock Exchange.

New details tonight of the government's efforts to recapitalize those ailing banks. The Treasury Department confirming the government will take equity stakes in financial institutions, spending up to $250 billion. "The Wall Street Journal" tonight reporting the government will buy equity in as many as nine financial institutions. President Bush is expected to make an announcement as early as tomorrow. We'll have much more on this later in the broadcast.

On the campaign trail, Senator McCain tonight trying to convince skeptical voters he can solve our economic problems and win this election. The senator trying to turn around his campaign after disappointing poll numbers, those polls giving Obama a lead of between four and 11 percent. Ed Henry with the McCain campaign reporting from Richmond, Virginia.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CORRESPONDENT (voice-over): Call it John McCain 4.0, another shifted message. The maverick morphing back into the fighter he talked about at the convention. SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Fight for what's right for America.

HENRY: His closing argument to independent voters, so the tone is less harsh on Barack Obama being risky and inexperienced. More about McCain is happy warrior.

MCCAIN: America is worth fighting for, nothing is inevitable here. We never give up. We never quit. We never hide from history. We make history. Let's go win this election and get this country moving again.

HENRY: The new message, getting unveiled in Virginia, a state Democrats have not carried in 44 years, shows how difficult the race is. Influential conservative William Kristol declared McCain has been totally overmatched by Obama writing in "The New York Times", "The McCain campaign once merely problematic, is now close to being out and out dysfunctional."

Kristol's fix, let McCain be McCain. Try to recapture some of the magic of his 2000 campaign, attack the candidate seems to be taking.

MCCAIN: I've been fighting for this country since I was 17 years old and I have the scars to prove it. If you elect me president, I will fight to take America in a new direction from my first day in office until my last. I'm not afraid of the fight. I'm ready for it.

HENRY: But McCain offered nothing new substantively to fix the financial crisis instead criticizing the bailout he voted for.

MCCAIN: I'm not going to spend $700 billion of your money just bailing out the Wall Street bankers and brokers who got us into this mess. I'm going to make sure we take care of the people who are devastated by the excesses of Wall Street and Washington.

HENRY (on camera): After leaving Virginia, John McCain headed to North Carolina. And on Friday, Sarah Plain is going to Indiana, two states Republican should have locked down a long time ago but haven't. Lou?

(END VIDEOTAPE)

DOBBS: Ed, thank you -- Ed Henry from Richmond, Virginia.

Senator Obama calling for urgent new measures today to boost the economy, the senator's plan including a 90-day moratorium on some home foreclosures. Obama again focusing on the economy, which he believes helps him win the support of independent voters. Jessica Yellin with our report.

(BEGIN VIDEOTAPE)

JESSICA YELLIN, CNN CORRESPONDENT (voice-over): Many of these voters in Ohio say they don't feel the ups on Wall Street, only the downs. UNIDENTIFIED FEMALE: If my dad didn't live with us, he helps us buy groceries and stuff like that, we probably wouldn't eat. I mean I just don't know how we would pay for our mortgage and everything else like that.

YELLIN: They're looking to the presidential candidates for answers.

CAROL PERKINS, OHIO VOTER: I wish someone would ask him, what would you do for the state of Ohio and Michigan if we run out of unemployment benefits to aid the people in our states that have been hit so hard.

YELLIN: Barack Obama says he has a plan.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Right now we face an immediate economic emergency and that requires urgent action. We can't wait to help workers and families and communities who are struggling right now.

YELLIN: He says his proposal targets Main Street.

OBAMA: It's a plan that begins with one word that's on everybody's mind and it's easy to spell, j-o-b-s, jobs.

YELLIN: Among the proposals the senator outlines a tax credit for businesses that create new jobs in the U.S., $3,000 per job, allowing cash-strapped Americans to withdraw up to $10,000 from their 401(k) and IRA plans with no penalty, creating a 90-day moratorium on foreclosures for good faith homeowners who need more time to restructure their mortgages and temporarily eliminating taxes on unemployment insurance. Obama is calling on Congress and the Bush administration to adopt his plans in a matter of weeks.

OBAMA: If Washington can move quickly to pass a rescue plan for our financial system there's no reason we can't move just as quickly to pass a rescue plan for our middle class.

(END VIDEOTAPE)

YELLIN: Now, Lou, the McCain campaign swiftly criticized Obama's plan. They singled out, in particular, his proposal to allow people to withdraw from their 401(k) and IRAs without any penalty. They say this is the wrong time to discourage savings but I'll tell you in this hall here in Toledo, that plan got the loudest applause of all, Lou?

DOBBS: Well, and what a ridiculous objection to it. If you're going to object to that, the most important implication, of course, is that it would encourage people to withdraw that money from their IRAs and 401 (k)s, which would put even more pressure on a badly battered stock market. It's ridiculous from both sides as far as I'm concerned, Jessica.

YELLIN: And they point out...

DOBBS: I should add that and get you off the hook, as always, great reporting, Jessica. Thank you very much -- Jessica Yellin.

Well, for more on what to expect over the next and last three weeks of this campaign we're joined now by Candy Crowley. Candy, Senator McCain is trying to energize, re-energize this campaign. How's he doing?

CANDY CROWLEY, CNN CORRESPONDENT: Well, we'll see. I mean, this is the first day of it so I'm not really sure how it's going. It seems to me he's doing three things here. One is it's a little back to the future. It's about his experience.

I mean today he spent a good deal of time saying we can't have on-the-job training. We -- you know we have to hit the ground running. The economy is a mess. Our enemies are watching. We have to have experience. The other thing that I thought was really interesting about McCain's speech was this line. We cannot spend the next four years as we have spent much of the last eight, waiting for our luck to change, so goodbye George Bush.

DOBBS: Well...

CROWLEY: That's sort of the last, little, you know, line between them, I think. I mean clearly he needs to push that away. The question is, does he need to come out and say, look, here's what I do specifically. Here's how I'd help you. We thought he was going to do it today. There was some talk he was, but the campaign said, no, no. We were just you know writing the speech. Dana -- our Dana Bash talked to him today and said, are you going to put out some more economic policy tomorrow and he said, well we'll see. So, you know, there you go.

DOBBS: It's -- he was more energized, I think...

CROWLEY: Yeah.

DOBBS: ... physically in his presentation. But I think at some point isn't there a place where we sign up and we stipulate that he's got experience and now we need to move sort of to a different view for, perhaps, a forward perspective?

CROWLEY: I can't -- I'm not inside their heads when they made this decision, but, that was what was working, if you recall, before the economy just, you know, fell out from underneath him. I mean the minute he said, you know, the basics or the economics -- you know our economics are strong...

DOBBS: Well let me ask you something. A couple of things with this campaign and you've been covering it very carefully. Amongst many things I don't understand about either of these campaigns is on the issue of, for example, Freddie Mac and Fannie Mae, in which now the American taxpayer has a half trillion dollar exposure.

But he has allowed Obama to define him as a deregulator because he made a comment this past spring, rather than McCain's campaign driving home the fact he was on this issue three years ago and pushing hard and sending letters to the speaker -- the Senate majority leader to move ahead with regulation.

(CROSSTALK)

CROWLEY: I mean they have tried to get that out there.

(CROSSTALK)

CROWLEY: Yeah.

DOBBS: Is what I'm...

CROWLEY: I'm not sure. I mean because you're perfectly right. Because -- and they tried to push back on that, but I have to tell you all along, we've seen an Obama campaign from the get-go, from January of '07 that has been very on target that has been very good at getting his message out.

DOBBS: They've returned to their game, haven't they?

CROWLEY: Absolutely. They have got their game on and McCain just got rocked by this economy and he's been struggling to get his footing back. And still hadn't done it, so I think that's why they're saying, you know, more policy here. You know get out and fight. That sort of thing is only going to go so far.

You can't have Obama out today going, well we should have a 90- day moratorium and we should give you know taxes -- tax cuts for small businesses to create jobs. McCain if he's going to grab hold of this issue, has got to grab hold of the imagination of people that are hurting.

DOBBS: Absolutely. And the few that are not need to come to terms with the fact that there has to be a focus in the national priorities on our middle class and that's whether you're a Republican or a Democrat, working men and women in this country have to be the focus of what's going on. Thank you very much, Candy Crowley -- thank you, in my opinion.

Up next, outrage over what many say is our government's failure to aggressively investigate corporate fraud in this financial crisis. We'll have that story and new charges of election fraud by the left wing activist group ACORN.

And one of the most important battleground states in the country joining 11 other states, whether they're under investigation. We'll have that report as well. We'll be right back.

(COMMERCIAL BREAK)

DOBBS: Election officials in Ohio today voted unanimously to begin investigating the radical left wing group ACORN on multiple counts of voter registration fraud. ACORN is already under investigation for election fraud in states all across the country. Today voters in Cuyahoga County Ohio testified that ACORN employees bribed and badgered them into registering multiple times. Bill Tucker has the report. (BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Witnesses came before the Cuyahoga Board of Elections in Ohio. They told of being harassed to register to vote.

CHRIS BARKLEY, REGISTERED VOTER: So the people would walk up to me and ask me would I sign these papers. So I'd be like, no, I'm already registered. And then they just ask me again like, I need a job. I'm just trying to hold on to a job. So would you sign this for me? I need 25 of them or I need a certain amount of them to do it, so me being a kind-hearted person, I say, yeah.

TUCKER: The workers doing the voter registration were from ACORN or the Association of Community Organizations for Reform Now. One of the witnesses testified he registered 73 times, even though he was already registered to vote.

FREDDIE JOHNSON, REGISTERED VOTER: Some of the individuals that worked at ACORN gave me you know cigarettes for a signature or you know a couple of dollars for a signature.

TUCKER: After hearing the testimony, the board voted to ask the county prosecutor to investigate ACORN. It is the latest in a long line of investigations of voter registration fraud for ACORN, a line that stretches back over several years. ACORN is currently accused of submitting false registration forms in at least a dozen states. A spokesman for ACORN says that in virtually every case, the fraud now being looked at is fraud, the group identified first.

SCOTT LEVENSON, ACORN: We went through registration forms, tagged potential problems, notified Boards of Elections. That's why one of the things we've been asking for is regular meetings with the state board of elections.

TUCKER: Levenson says ACORN does not tolerate the type of behavior testified to in Cuyahoga County and that workers found to commit registration fraud are fired. The problem for ACORN is this is a repeated pattern, one seen across the country in over several years.

(END VIDEOTAPE)

TUCKER: As to whether there are any federal investigation being conducted into the issue of voter registration fraud, not surprisingly, the FBI is not commenting and the Department of Justice Civil Rights Division is also refusing comment. Lou, we called them this afternoon.

DOBBS: Yeah, we wouldn't want to disturb them in any way. We wouldn't want them to take on this issue because they wouldn't want to discuss even broadly the prospect that they would be protecting the civil rights of American citizens; no, we wouldn't want to do that. Bill Tucker, thank you very much.

Well Indiana secretary of state tonight says there's credible evidence of election fraud by ACORN. Secretary of State Todd Rokita says that he wants the state attorney general and federal prosecutors to begin investigation of allegations of voter registration fraud in Lake County. As we reported to you last week, ACORN employees in Lake County turned in at least 2,100 fraudulent voter registrations in the days before the deadline to register new voters at the same time during that window in which they could vote.

In Florida, tens of thousands of convicted felons are now on voter registration rolls. A "Sun Sentinel" newspaper investigation finding that more than 30,000 felons who by law are bored -- barred from voting are still registered and some 5,000 of them voting. Fifty-six hundred are still in prison, by the way. Florida Secretary of State Kurt Browning said he isn't surprised by "The Sun Sentinel" report. He says, quote, "I'm kind of shocked that the number is as low as it is."

Up next, Congress pushing for another stimulus package, will it benefit middle class Americans or corporate America? Some lawmakers, by the way, are calling for far reaching fraud investigations into Wall Street. Something I called for here a month ago, but the FBI may not have the staff to handle that little mission. We'll have those stories and a lot more straight ahead. Stay with us. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: Some members of Congress tonight calling for federal investigations into corporate fraud. The FBI is now investigating 26 cases related to our financial crisis, including Fannie Mae, Freddie Mac, AIG and Lehman Brothers. As Lisa Sylvester now reports, some lawmakers say that's not nearly enough.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): In a letter sent Friday to FBI Director Robert Mueller, Representatives Mark Kirk and Chris Carney called on the FBI to triple the resources devoted to investigating corporate fraud. According to FBI records, there are 261 FBI agents in the corporate and security's fraud unit. Not enough, says Congressman Kirk.

REP. MARK KIRK (R), ILLINOIS: Only 260 agents, I think, is inadequate given the opportunities that criminals have had in the last couple of months. With the enormous drop in the market, it's clearly a signal that a number of things were concealed from small investors and pension funds.

SYLVESTER: In fiscal year 2003, the FBI had 436 pending mortgage fraud cases. Today there are more than triple that number, more than 1,400 cases. The FBI is also looking into Fannie Mae, Freddie Mac, AIG and Lehman Brothers. At a recent hearing FBI Director Mueller said the bureau will investigate corporate excesses as it did during the savings and loan crisis.

ROBERT MUELLER, FBI DIRECTOR: The FBI will pursue these cases as far up the corporate chain as is necessary to ensure that those responsible receive the justice they deserve. SYLVESTER: Among the areas of investigation, accounting fraud, failure to report, and potential market manipulation. With the stock market down 18 percent in one week alone people want answers.

STEPHEN MOORE, WALL STREET JOURNAL: We're talking about tens if not hundreds of billions of dollars of shareholder losses that have taken place in the course of the last six months. And, yes, it's quite appropriate for investors to ask the question, was I defrauded?

(END VIDEOTAPE)

SYLVESTER: Now the FBI responded to the congressional letter saying it would hire more agents if it had more money from Congress saying, quote, "our field offices have been working fraud cases diligently over the last years. We can always use more resources for our programs", end quote, so clearly putting the ball back in Congress' court. Lou?

DOBBS: All right. Thank you very much, Lisa -- Lisa Sylvester.

Let's take a look now at some of your thoughts, Rhonda in Indiana. "How can anyone take this upcoming election seriously? Voter fraud involving ACORN, illegal aliens possibly voting, electronic ballot machines with no paper trails. Is our government serious?" You know the answer to that.

And Judy in Illinois, "Thank you for reporting the ACORN story. All of the voter registration forms collected by them should be tossed."

Tom in North Carolina, "I do enjoy your show. Keep asking and reporting on the stories that others don't. Have you noticed that there is all the talk about placing blame and the bailout, but not a word or action about taking the steps to see this doesn't happen again?" We'll have more of your thoughts here later.

Up next, "New York Times" best selling author, "Wall Street Journal" columnist Peggy Noonan joins me. She has an important new book "Patriotic Grace", a book that every voter should be reading.

And the Treasury Department giving new details of its plan to recapitalize ailing banks, will that plan work? Will it help the stock market? Well we didn't have a bad day today, did we?

House Speaker Nancy Pelosi pushing a new plan to revive this economy. Some say Pelosi putting partisanship before the national interest is not a likely occurrence. We'll have that story and more. Stay with us.

(COMMERCIAL BREAK)

ANNOUNCER: This is LOU DOBBS TONIGHT; news, debate and opinion. Here again Mr. Independent, Lou Dobbs.

DOBBS: A resounding historic rally on Wall Street today. The Dow Jones industrials soaring 936 points, closing at 9387, an 11 percent gain, the biggest point increase in history. There's more good news. At the gas pump gas prices down more than 35 cents over just the past two weeks. That's the biggest price decline in history. The nationwide average for a gallon of regular gasoline now at $3.31 a gallon.

One of the causes of today's record breaking rally promises from the Bush administration that it's moving quickly to implement the bailout, recapitalizing the nation's ailing banks, but as Kitty Pilgrim now reports, this unprecedented package is long on promises but certainly, right now, short on details.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Global credit crisis, when all else fails offer more money, unlimited amounts. The Federal Reserve along with major European central banks said they would let commercial banks borrow, quote, "any amount they wish", according to the joint statement with the U.S. Federal Reserve. A brand new unheard of approach to ease the credit crunch particularly the freeze in lending between commercial banks, now the government will use taxpayer money to keep banks in the lending business. The new extraordinary authority today was explained by the new Treasury trouble shooter.

NEEL KASHKARI, BAILOUT CZAR: Secretary Paulson and Chairman Bernanke went to the Congress and asked for extraordinary authorities to go after these extraordinary challenges that we face.

PILGRIM: Another banker at the luncheon summed up the coordinated effort.

THOMAS HOENIG, KANSAS CITY FED. RESERVE BANK: Desperate time requires desperate measures and so right now we're cooperating.

PILGRIM: This is a new wrinkle to the original $700 billion bailout plan. A quick fix with other central banks arrived at the weekend after the worst financial week in memory, where millions of Americans watched their investments plummet in value as credit markets froze. But some point out the government bank-to-bank overnight lending does not immediately address the credit crunch that the average American faces.

CHRISTIAN WELLER, CTR., FOR AMERICAN PROGRESS: These massive government interventions from the leaders in the U.S. and in Europe, and other countries, will handle the financial market crisis. What they don't address is the economic crisis. It doesn't really help the businesses and families to grow their incomes that the point.

(END VIDEOTAPE)

PILGRIM: Now other measures to ease the credit crisis, the Treasury plans to spend up to $250 billion of these $700 billion bailout to recapitalize banks and financial institutions. And also the FDIC will insure new senior bank debt for three years, that announcement of measures was expected to be officially made tomorrow, Lou. DOBBS: All right, Kitty. Thank you very much. Kitty Pilgrim.>

Our poll tonight, the question is: Do you believe Treasury Secretary Paulson is finally doing something to help America's ailing middle class, instead of his Wall Street cronies? We'd like to hear from you, yes or no. Cast your vote at LouDobbs.com. We'll have the results upcoming.

House Democrats and Republicans tonight, both calling for new stimulus packages although very different. Democrats wishing a plan to help state and local governments. Republicans are pushing their own plans to cut capital gains taxes and corporate taxes. Kate Bolduan has our report from Capitol Hill.

(BEGIN VIDEOTAPE)

KATE BOLDUAN, CNN CORRESPONDENT (voice over): In a move to show Americans Congress is trying to recharge the economy House Democrats returned to Washington Monday to push another stimulus package.

REP. NANCY PELOSI (D) HOUSE SPEAKER: As we go into survival mode, which we must do, if we're going to strengthen our economy, we have to make some decisions that I think the American people see in a fresh new perspective.

BOLDUAN: The focus, spurring job creation and help for state and local governments. The cost? As much as $150 billion. Iowa's Democratic Governor Chet Culver says his state and others need a hand.

GOV. CHET CULVER, (D) IOWA: We are all focused on helping families stay in their homes. And, also, helping families have more disposable income.

BOLDUAN: According to the Center for Budget and Policy Priorities, 29 states and the District of Colombia have faced serious budget short falls this fiscal year, totaling more than $48 billion. The Democratic stimulus plan includes funding for state Medicaid programs and infrastructure projects like roads and bridges, individual rebate checks, or some form of tax credit, also an extension of unemployment insurance.

REP. BARNEY FRANK (D), CHMN., FINANCIAL SERVICES CMTE: If we do not go to the aid of state and local governments now, they will now become an added factor to the job loss rather than something of a mitigating factor.

BOLDUAN: The House Republican leaders are critical of the Democratic plan. In a letter to House Speaker Nancy Pelosi Monday, House Republican leader John Boehner said, "Nothing currently being discussed by the majority as, quote, 'stimulus" will stabilize the economy long term."

Republicans are now pushing their own stimulus package calling for capital gains and corporate tax cuts, as well as expanded domestic drilling for oil, among other proposals. The number two House Republican, Roy Blunt, spoke on ABC's "This Week". REP. ROY BLUNT, (R) MINORITY WHIP: Let's not use the stimulus package as an excuse to do what Democrats have wanted to do from day one of this Congress, which is a huge public works plan.

(END VIDEOTAPE)

BOLDUAN: Now, a top Democratic leadership aid in the House says that is likely that the House will be called back shortly after the November election to take up a stimulus measure. But while the lawmakers are talking stimulus, how is this idea playing outside the political arena? Well we talked to a number of economists and analysts and some say it won't work. Describing it simply as a sugar high, but others say that some stimulus, if done right, could really stimulate the economy and get it back on track, Lou, but that's the challenge.

DOBBS: Now, we've already had $2.5 trillion in new dollars in this economy over the course of the past six months. So, a little more, I guess, it wouldn't have much -- couldn't do any more harm.

Thank you very much, Kate Bolduan.

Up next, new strategies from both presidential candidates today. One accuses the other of already measuring the drapes. Three of the best political minds join me.

"Patriotic Grace", the title of my next guest's new book. She says our nation urgently needs some of that right now. Peggy Noonan joins me. Stay with us. We'll be right back.

(COMMERCIAL BREAK)

DOBBS: My next guest says this country must come together and rise above party politics no matter who wins. Peggy Noonan is a "Wall Street Journal" columnist, former special assistant to President Reagan, best-selling author. And joins me now to talk about her brand new book, "Patriotic Grace."

Peggy, good to have you here.

PEGGY NOONAN, AUTHOR, "PATRIOTIC GRACE": Hello, Lou.

DOBBS: Let's first of all talk about "Patriotic Grace." This campaign seems, well, "Patriotic Grace" or any other kind of grace seems to be relatively absent, doesn't it?

NOONAN: Yeah. I think the campaign is not an ennobling time. You know?

(LAUGHTER)

NOONAN: I don't think we're looking like our best selves. Or the parties are looking like their best selves, and nonetheless, I think at least after the election we'll have to sober up and get serious.

DOBBS: This has been a rather sobering period. Not because of the election, per se, or the campaign, but because of what is happened in this economy; watching 40 percent declines from a year ago.

In your book you say we have been, quote, "Asking a great deal of mere mortals, who lead us, while we ask too much of them we keep them from doing, we allow them to avoid doing the primary thing we need them to do well, which is to know what time it is and act accordingly."

I think that's extraordinarily well said. I just can't imagine it resonating with either candidate.

NOONAN: Well, remember what we saw in the case of Katrina. We have this big lumbering huge, expensive, roiling in money federal government. One big thing happened. We needed them to move and make things safer and better. Could they? No. They are distracted by doing a million things.

It's certainly some of Katrina - not to go off on Katrina - but certainly some of it was sheer incompetence, sheer managerial lack. Some is a distracted government pulled in a million different ways and they got to get serious and focus more.

DOBBS: Congress, too often, whether the House or the Senate, seems like aggregation of, I don't know, I, I - of siding salesmen. And people who are not very serious. They could be in almost any country club at the bar half the time. The White House, right now, it's occupant is a befuddled fool, who's been incompetent in every aspect that one can -- almost every aspect one can imagine. How are we to judge these two candidates, given your metrics?

NOONAN: I think in the case of the president himself, he is a living example of the importance of a president maintaining his popularity. You know? This president has wasted and squandered so much of it, so much of the things that people once admired in him. And he's now at a point where we're actually in a national economic crisis and he cannot lead in it. When he comes forward and speaks about it he speaks briefly and then scurries away. He sounds more like someone who is a commentator on a crisis, than someone leading through a crisis.

One of the ways you might look at each candidate is try to figure in a crisis, which is the guy who can reasonably seem to be leading us through something? And who isn't - ah, running away from the responsibility?

DOBBS: Well, I love the way you describe how these politicians view themselves.

A politician looking upon himself, or herself, but in this case, himself, "I'm just a guy who loved politics. I buy my suits add Moe's Big & Tall. I'm not a theologian. I'm not a scientist. And you shouldn't make me make these decisions. I'm stupider than you understand."

And as I look at that, I think, how could they be any dumber than I already do understand?

NOONAN: Well, and we're asking them to make decisions on things like stem cell research. And the moment at which life begins, and enormous social policies. So these are, maybe, not the people you want to be putting so much responsibility my into their hands. But they are what we have and we still have to be serious. We're going to have a new Congress after November 4th. We're going to have a new Senate, a new House. We'll have a new president.

And they got to focus on some big things. One is our national security. Some tough thing is going to happen to us down the road. Another is our economic issues. We're not a strong nation unless we're also a wealthy and prosper rouse nation.

DOBBS: And as you say, this administration, and the one before it, squandering so much. You also talk a great deal about unity. Is unity possible here?

NOONAN: I was thinking today, maybe we're in a huge awful brute, brawl between two large lumbering - and not always inspiring - political parties. Maybe in the exhaustion afterwards we'll get a sense of , you know what, we've got a new guy. We're going to have to back him in a reasonable way as he makes some serious proposals. And when he's all wrong, we'll have to -- with our best selves, in a reasonable way, as mature adults say, no, you're wrong. We think this is the way to go.

Mostly, I think we have to lift our game. You know what I mean? We keep thinking we're living in a tough time and a challenging time. It's not tough and challenging it's unprecedented.

DOBBS: I think you're right. And the book is "Patriotic Grace," Peggy Noonan. And I wish, frankly, that our elected officials and those campaigning for, certainly, at least the highest office in the land, would rise to the level of the people they should be thinking of serving.

Peggy, it is great to have you with us.

NOONAN: We've got three weeks. You never know. Surprising things happen and that would be a surprise.

DOBBS: No. That would be a shock! Peggy, thank you very much.

NOONAN: Fair enough.

DOBBS: Peggy Noonan.

A reminder now to vote in our poll. Do you believe Treasury Secretary Paulson is finally doing something to help this country's ailing middle class, instead of his Wall Street cronies? Cast your vote at LouDobbs.com. We'll have the results here in just a few minutes.

And a reminder to please join me on the radio, Monday through Friday, for the "Lou Dobbs Show". Tomorrow my guests include John Ratzenberger on the fifth and final season of his hit TV series, John Ratzenberger's Made in America". Go to LouDobbsradio.com to get your local listings for "The Lou Dobbs Show" and please join us. Up next, three weeks until election day? Where did I hear that? Oh, that's right, Peggy Noonan just said that.

Senator McCain hoping for a dramatic turn around. Will more independent voters rally to him? We'll be talking about that. And Senator Obama trying to widen his already significant lead. What's really in it for you? Three top political analysts join me next.

(COMMERCIAL BREAK)

DOBBS: Congressman Tim Mahoney tonight asking the House Ethics Committee to investigate his behavior. The request comes after ABC News reported Mahoney paid his former staffer and mistress $121,000 to avoid a sexual harassment suit.

Congressman Mahoney reportedly paid his former aide, Patricia Allan, $61,000 in cash, an additional $60,000 for legal fees. Mahoney's West Palm Beach area congressional seat, formerly held by Republican Mark Foley, Foley resigned in the late 2006 after his own sex scandal involving inappropriate communications with male pages. Mahoney ran on a promise to restore honor and morality, of course, to office.

Top Democratic Congressman John Lewis tonight backing away from his controversial remarks that caused an uproar. Lewis saying comments he made Saturday comparing feelings that recent Republican rallies to the views of segregationist George Wallace were misinterpreted. Congressman Lewis said he was warning about the dangers of what he calls toxic language. The congressman insists he didn't compare Senator McCain or Governor Palin to Wallace.

McCain said Lewis' original statement was shocking and beyond the pale. Tough stuff, don't you think? Well, to assess that, we're joined now by three of the best political analysts in the country, all CNN Contributors; Republican strategist Ed Rollins; and White House political director and former chairman of Mike Huckabee's presidential campaign, Pulitzer prize-winning columnist, "New York Daily News", Michael Goodwin, and Democratic strategist, Democratic National Committeeman Robert Zimmerman.

Golly, I just think the McCain campaign was so strong in that response to Congressman Lewis he just feel terrible tonight.

ED ROLLINS, CNN CONTRIBUTOR: I think McCain, who has cared deeply about his fellow human beings and I think to be accused and to be compared to George Wallace is pretty outrageous and whatever the explanation today is --

DOBBS: But all he did was basically cluck! I mean, the man took a shot to his teeth and responded with, aah! I mean, give me a break. I mean, this is ridiculous.

ROLLINS: I have to tell you, Lou, I'm a little bit more of a fighter than maybe some of the people in the McCain campaign. And when you've been knocked down about 17 times as they have and they say, I'm exactly where I want to be, you know, that's using a pretty good formula for losing.

DOBBS: Yeah, I mean, Thank you, sir. May I have another? What the heck is this? Michael?

MICHAEL GOODWIN, CNN CONTRIBUTOR: You know, who was the baseball manager who said, you know, show me a good loser and I'll show you a loser?

UNIDENTIFIED MALE: (UNINTELLIGIBLE)

GOODWIN: Yes, right. The McCain campaign is betwixt and between. It doesn't seem to know who it is, what it is, and how to fight now.

DOBBS: Isn't than an answer for the American people? Why should anybody even think about voting for this man?

GOODWIN: He's not given them many good reasons in the last two weeks.

DOBBS: Then get off the stage and move on and let's not waste our energy and time. We have some serious problems here. We need a serious person to deal with it. One presumes, and hopes, that that person would be Senator Obama. Why should the American people tolerate this kind of nonsense?

GOODWIN: I'll give you the latest thing, Lou. The issue of whether McCain will have a prescription for the economy. A whole new plan as Obama did today. I was on a conference call.

DOBBS: Which, by the way, wasn't a brilliant idea.

GOODWIN: No, but the McCain people said, decidedly the John McCain, tomorrow, will have a new list of measures.

DOBBS: Unbelievable.

GOODWIN: McCain, himself, told Dana Bash, I'm not really sure. At this stage they still can't get their own marching orders straight.

ROBERT ZIMMERMAN, CNN CONTRIBUTOR: I think it's much deeper than they can't get their own marching orders.

GOODWIN: Of course it is, but that's a symptom.

ZIMMERMAN: I think it is an absolute symptom. You're totally correct.

DOBBS: Before you comment on how the Republicans are running their race, let's turn to this.

ZIMMERMAN: I didn't think I'd get away with that, but I thought I'd give it a try.

DOBBS: I mean, this business with Congressman Lewis. You know, I mean, with - he's - his historic role in civil rights, but I mean, what he said is beyond objectionable. It is repugnant. There wasn't a single response from the Democratic Party, neither your Democratic National Committeeman, nor your candidate for president, nor anyone else of any position or standing in the Democratic Party - I mean the man should - I mean, that's an absurd, insulting, ignorant thing for him to have said! Why isn't there a response from your party?

ZIMMERMAN: Let me be clear about that. John Lewis lived -was a victim of the hateful vicious rhetoric that is on the campaign trail.

DOBBS: Excuse me, I just stipulated his role in history and civil rights.

(CROSS TALK)

But let's talk about 2008 in a presidential campaign, any man talking like that in this day and age is absolutely ignorant.

ZIMMERMAN: The issue - look, there is no question -

DOBBS: So tell me why didn't your party respond?

ZIMMERMAN: I'll be the first to agree you can't compare George Wallace's record, or John McCain.

DOBBS: That is a tremendous concession.

(CROSS TALK)

ZIMMERMAN: But I will compare the rhetoric between George Wallace used and the rhetoric the McCain/Palin campaign is using.

DOBBS: Robert Zimmerman, that is absolutely beneath you.

ZIMMERMAN: Let me give you a few examples then.

DOBBS: No, give me one.

ZIMMERMAN: I'll give you one. When John McCain said that Barack Obama would be prepared to lose a war to win an election, challenged his patriotism. When the McCain campaign ran an ad --

DOBBS: Stop right there. Stop right there. You compared that to George Wallace? You know what, Robert, there are days when things get to the point where you don't really know -- I'm talking about myself - I don't comprehend what the heck you're talking about. ZIMMERMAN: I'll tell you.

DOBBS: Does anybody here?

ZIMMERMAN: How about when the McCain campaign says in the most recent commercial -- television ad, that Barack Obama conveniently worked with terrorists. Where Sarah Palin said he was palling around with terrorists. That idea of linking Barack Obama to terrorism is a hateful divisive tactic and it should be recognize as such.

GOODWIN: Lou, I think, there is some dangerous ground here, which is that if you can't criticize Obama without being accused of playing the race card --

DOBBS: I'm just -

(CROSS TALK)

ZIMMERMAN: This is not the race card, Michael.

(CROSS TALK)

DOBBS: I can't believe you're sitting there saying that there is some sort of equivalence between George Wallace and what the heck, either --

ZIMMERMAN: I'm say the rhetoric that George Wallace used and the rhetoric that John McCain and Sarah Palin is using is as ugly and divisive.

DOBBS: Are you out of your -- that's ridiculous.

ROLLINS: You show me one time.

It's a very legitimate comparison to talk about Bill Ayers, who had a relationship - who should be in jail.

ZIMMERMAN: No argument.

ROLLINS: Bill Ayers should be in jail. He was a terrorist. He blew up the New York Police Department. He was a part of the Weathermen, attacked the capitol, attacked the Pentagon, and basically did everything he could to undermine this country.

To talk about that relationship, which is a legitimate relationship, to take one of the great racist of all time, George Wallace --I don't care about he ended up, in the end of his life. When he was active, he was divisive - and to take that John McCain and put that comparison. We are trying to walk a very sensitive line not to make race an issue in this campaign.

ZIMMERMAN: This is not about race, Ed.

ROLLINS: It is about race.

ZIMMERMAN: This is about the McCain campaign strategy turning the page from to discussing the real issues, as they said, and make it a character question.

(CROSS TALK)

DOBBS: Now you've moved to a level that is absurd, absolutely absurd.

ZIMMERMAN: I normally get to that level later in the show.

(LAUGHTER)

DOBBS: You usually don't make it at this point in the show, because -- but anyway.

The idea that there is some sort of stricture here, I mean, go back and look at the campaigns of the early 1800s and what was said about candidates. I mean, are you -- I cannot even begin to fathom what you're saying about George Wallace, and the comments that you made. I ask you for one example.

ZIMMERMAN: George Wallace built a political career on divisiveness -

DOBBS: No, no, no. He was charged with being racist here, OK?

ZIMMERMAN: No, no, I don't.

DOBBS: Please listen. Please listen.

ZIMMERMAN: OK.

DOBBS: Please listen. He was charged with being a racist like George Wallace. Is there any doubt in your mind that that's what John Lewis said? Is there any doubt?

ZIMMERMAN: John Lewis was referring to the rhetoric Wallace used as being divisive and hateful.

DOBBS: Oh, divisive. So, then why would you need to use George Wallace? You could go back to the rhetoric of Jeremiah Wright, if you wanted to worry about division.

ZIMMERMAN: No argument. No argument again.

DOBBS: So where, again, is the Democratic Party? Where is the Democratic Party?

ZIMMERMAN: Look, in fairness to John Lewis -

DOBBS: No, not in fairness to John Lewis. He made an outrageous statement. Period.

ZIMMERMAN: I think --

DOBBS: And if anyone in the Democratic Party had scintilla of guts and integrity in the leadership, they would have commented and --

ZIMMERMAN: I think it takes a little bit of guts for me to debate the entire panel on this, too.

DOBBS: Not really.

(LAUGHTER)

DOBBS: But we'll be back and see how much you've got there, of the firepower, as we continue.

At the top of the hour we'll be joined by Campbell Brown, with "The Election Center". Campbell, what are you working on?

CAMPBELL BROWN, CNN ANCHOR, ELECTION CENTER: Thanks, Lou.

Tonight, we're going to talk about this late word we're getting from the White House on yet another bailout for banks. What this may mean?

Also the market today, a lot of celebrating around that. Is that giving us some sort of false sense of security? We'll talk about that.

And then, a lot going on out on the campaign trail, Barack Obama laying out his middle-class economic rescue plan. We'll put that to our "no bias" test.

John McCain on the ropes, now. If you look at the polls, vowing to fight back, even though he's got some Republicans now saying it's a lost cause. We're going to talk about that as well. All tonight in "The Election Center" - Lou.

DOBBS: Thanks, Campbell. And we'll be back with our panel and Michael Goodwin will explain why perhaps there's some -- some slight intent here to constrict, constrain and confine public debate. We'll be right back.

(COMMERCIAL BREAK)

DOBBS: We're back with Ed Rollins, Michael Goodwin, Robert Zimmerman.

Robert Zimmerman, who has just absolutely introduced the concept that George Wallace doesn't have anything to do with racism or racial politics --

ZIMMERMAN: No, I didn't say that.

DOBBS: We'll turn to Michael good win now. What is the effort here? Are they trying, the Obama campaign, the Democratic Party, trying to somehow define this as a racial -- racially -- racial parameter?

GOODWIN: I think many elements of the Democratic Party are trying to do just that. Not only does it try to restrict McCain's attacks, but it also, I think, there's a sense of guilt now, if you don't vote for Obama there's a racist. That somehow there's an obligation. That is a civil rights vote, rather than a vote for president. And I think that's a dangerous thing for the Obama campaign, first of all. Should he become president, he's going to have to take the hard knocks that all presidents take. He can't be let off easy because he's black, and we all have to be careful he's not going to be criticized.

DOBBS: It's a little late for that, isn't it?

GOODWIN: No, it's not too late. Here we are three weeks. DOBBS: But the Democratic Party, the national media, I mean, they're -- I've never seen, have you, a situation in which we've had one candidate embraced to the point that it's absurd?

GOODWIN: And race is clearly a part of that.

DOBBS: It is that irrespective of race. I mean -- go ahead, I'm sorry.

ROLLINS: No, I - you know, 96 percent of African-Americans are going to vote for Obama. Part of it is pride, part of it is because of the issues (ph).

DOBBS: Part of it is just because they're Democrats.

ROLLINS: Because there's Democrats.

(LAUGHTER)

ROLLINS: But equally as important, there's this great fear that this segment of America, you can't find any evidence in the polls, you can't find it anywhere, that everybody keeps saying they're not going to vote for him because of his race, and I think that's outrageous.

DOBBS: You know where you've heard most of that, though?

ROLLINS: Out in the media.

DOBBS: You've heard that in the national media.

ROLLINS: Absolutely. Totally.

DOBBS: The media has brought up more race, more nonsense in this race.

ROLLINS: Absolutely.

DOBBS: To drive ratings, to drive circulation, and I mean -- by the way, much to the enjoyment I'm sure the Obama campaign, because it works in their favor. But let's -- going back to the politics here.

ROLLINS: I keep talking about the Bradley race. I was the White House political strategist when Bradley was elected. Bradley won on election day. We went out and did an extensive absentee ballot program, 200,000 absentee ballots were voted, Democrats had not absentee ballots. We put those ballots in the day before, we won with the absentee ballots, we lost on election day.

Bradley lost in the overall vote. They all want to basically say it was because there was racism. He lost by barely a margin and he ran a terrible campaign.

ZIMMERMAN: It's worth noting that the Obama campaign did in fact disavow Congressman Lewis's comments, and more to the point, he's out there with an economic plan today, and we're still waiting for John McCain to talk about real issues. DOBBS: I already did. I already talked about those issues. It's one of the dumbest things I've ever heard -- giving away tax free $10,000 for 401(k)s and IRAs. I think it's ridiculous, because it will put pressure on stocks, the last thing you need.

Do folks need help? You bet, let's get real, but you know, where Barack Obama and John McCain put their efforts? Bailing out Hank Paulson's buddies on Wall Street. And now three weeks later, finally at least, they're acknowledging that they didn't know what the heck they were talking about.

Let's turn to, if we may, the reality here. What's the reason to vote for John McCain? I haven't heard it. I really haven't heard it.

ROLLINS: The only way I can make it, it's not an argument that he's made, if you want to keep your taxes down and if you want to basically have a strong military, vote for him. That's the difference. And there's...

GOODWIN: Well, I think his attacks on Obama do have a certain logic to them, which is, yes, we're in tough times, the current administration has failed us, this new young guy is untested, he's not ready. You can't trust him in tough times. I think that's a good argument.

ZIMMERMAN: I can't give you a case for McCain, but this election is about big issues. And until you see John McCain address those big issues, he's not going to be able to mobilize the support in some respects that he should be entitled to. I think that's why you see support in almost every category shifting to Obama.

DOBBS: All right. Thank you very much. What a surprising analysis. Thank you very much. Appreciate it.

Tonight's poll results -- 88 percent of you say Treasury Secretary Paulson is still helping his Wall Street cronies instead of America's ailing middle class. We thank you for being with us. Join us here tomorrow. For all of us, we thank you for watching. "THE ELECTION CENTER" with Campbell Brown begins right now -- Campbell.

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